By Stanley White
TOKYO, April 6 (Reuters) - Japan's finance minister on Tuesday praised the work of Bank of Japan Governor Masaaki Shirakawa two years into his term but reiterated government expectations for close cooperation with the BOJ to end deflation.
At the same time, the banking minister, who heads a small coalition partner in the Democratic Party-led government, called for bold measures to stop persistent price falls, saying that passing Japan's record budget for the fiscal year that began on April 1 won't be enough.
Their comments suggest they are likely to keep pressuring the BOJ to support the economy as the government's approval ratings are sliding before an election expected in July while the massive public debt prevents the government from boosting spending.
The BOJ wraps up a two-day meeting on Wednesday and is likely to keep policy on hold after doubling the size of a special funding operation only last month, but it remains ready to ease further in its drawn-out battle with deflation.
'I think Shirakawa is doing a very good job,' Finance Minister Naoto Kan told reporters after a cabinet meeting when asked how he evaluated the BOJ chief's performance.
'The government and the BOJ have been working very well together in response to deflation. We are both doing what we can to achieve a common goal.'
However, banking minister Shizuka Kamei's calls for big spending have mostly gone unheeded as Japan's debt burden -- roughly twice the size of the economy -- is already the worst among industrialised nations. Credit ratings agencies have threatened to downgrade Japan if it doesn't show more fiscal discipline.
The BOJ, which in March expanded a scheme where it lends commercial banks funds for three months at the benchmark rate of 0.1 percent, is likely to save its limited remaining policy options in case a spike in the yen or bond yields triggers renewed government calls for more central bank action.
The BOJ has responded to government pressure before and first introduced the three-month funding scheme in December after almost daily prodding from cabinet ministers.
BOJ Governor Shirakawa's term runs from April 2008 to April 2013.
(Editing by Hugh Lawson)
((stanley.white@thomsonreuters.com; +81 3 6441 1984; Reuters Messaging: stanley.white.reuters.com@reuters.net)) Keywords: JAPAN ECONOMY/ (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
TOKYO, April 6 (Reuters) - Japan's finance minister on Tuesday praised the work of Bank of Japan Governor Masaaki Shirakawa two years into his term but reiterated government expectations for close cooperation with the BOJ to end deflation.
At the same time, the banking minister, who heads a small coalition partner in the Democratic Party-led government, called for bold measures to stop persistent price falls, saying that passing Japan's record budget for the fiscal year that began on April 1 won't be enough.
Their comments suggest they are likely to keep pressuring the BOJ to support the economy as the government's approval ratings are sliding before an election expected in July while the massive public debt prevents the government from boosting spending.
The BOJ wraps up a two-day meeting on Wednesday and is likely to keep policy on hold after doubling the size of a special funding operation only last month, but it remains ready to ease further in its drawn-out battle with deflation.
'I think Shirakawa is doing a very good job,' Finance Minister Naoto Kan told reporters after a cabinet meeting when asked how he evaluated the BOJ chief's performance.
'The government and the BOJ have been working very well together in response to deflation. We are both doing what we can to achieve a common goal.'
However, banking minister Shizuka Kamei's calls for big spending have mostly gone unheeded as Japan's debt burden -- roughly twice the size of the economy -- is already the worst among industrialised nations. Credit ratings agencies have threatened to downgrade Japan if it doesn't show more fiscal discipline.
The BOJ, which in March expanded a scheme where it lends commercial banks funds for three months at the benchmark rate of 0.1 percent, is likely to save its limited remaining policy options in case a spike in the yen or bond yields triggers renewed government calls for more central bank action.
The BOJ has responded to government pressure before and first introduced the three-month funding scheme in December after almost daily prodding from cabinet ministers.
BOJ Governor Shirakawa's term runs from April 2008 to April 2013.
(Editing by Hugh Lawson)
((stanley.white@thomsonreuters.com; +81 3 6441 1984; Reuters Messaging: stanley.white.reuters.com@reuters.net)) Keywords: JAPAN ECONOMY/ (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.